The Exchanges

Q And have we seen enough of an increase in the businesses produced in the healthcare IT sector to, to, to supplement this demand?

A Um, I think so. I mean, we've seen, uh, Amazing amount of talent, um, in the form of entrepreneurs, um, coming into healthcare over the last five years, and, and a commensurate amount of increases in venture capital funding, and a broadening of those people that invest in this space, to include many technology investors, uh, to support the creation of new companies. I think we've also seen enough successes that people will say, you know, healthcare's not Siberia anymore. I could come here and build a high-growth, interesting company, uh, whether that's Athena Health, who, you know, was one of the early examples of a healthcare technology company that, you know, was SaaS that, That, that did really well, or more recently, Casper Health, or Fitbit, um, or some of our newer ones, Zenefits, and Lyra Health, that you're seeing people build high growth companies that are very interesting, uh, and that's drawing more talent to the sector. The other great thing is that it used to be, you know, equally Siberia-like to sell products to hospitals and insurance companies, and they've been jolted enough by the changes in the, in the U.S. healthcare economy that they're willing to take risks of trying products From earlier stage companies that, you know, may not pass the SOX to compliance, you know, tests that they used to put you through.

AI assessment note: “Um, I think so. I mean, we've seen, uh, Amazing amount of talent”

Q Are there any areas of the healthcare sector which are largely ignored, do you think, or underserved?

A Um, well one of them is administrative costs. So one of the amazing statistics about U.S. healthcare is that for every doctor there are 16 FTEs walking around behind that doctor doing stuff, and of that 16, nine of them are administrators. That ratio has gone from one to 10 to one to 16 in the last 20 years, so we've gotten actually less productive. Every other sector of the economy has figured out how to squeeze administrative labor down to as close to zero as you can, because that's not productive, and then have all your labor be the productive stuff that's making the, you know, the product work. Uh, healthcare has to get rid of, hopefully, you know, seven of those nine people, um, on admin as fast as it can if it ever wants to have lower prices and higher margins. And so I think that there's a lot of opportunity to create software that, you know, that digitizes a lot of what those people do. Um, that includes things like billing, coding, and collections. It takes half an FT per bed to bill and collect for patients in a hospital. It's crazy. Um, Things like compliance reporting and credentialing. There's a whole bunch of admin that we should get rid of.

AI assessment note: “well one of them is administrative costs. So one of the amazing statistics”

Q And there have been a number of significant changes in healthcare IT in terms of Uh, measurements and incentives. So what do you think the most significant changes have been in the sector? And why do you think we should pay attention to them?

A So I think that there's been two enormous changes, which are byproducts of the Affordable Care Act, the High Tech Act, and the recession, quite frankly, which engaged a lot of companies, uh, who pay for a lot of healthcare on how they should manage their costs. Uh, the first one is an amazing liberation of information. The second one is Changes to incentives. Um, they go together, um, On information, healthcare's been, you know, classically, you know, the, the textbook example of information asymmetry leading to inefficient markets, and for the first time, beginning with really the high tech act, which was a byproduct of the recession, we decided that it was time to wire American healthcare, and so we gave roughly thirty billion dollars to doctors to buy meaningfully used computers and to hospitals, and today we have about 90% of hospitals and, you know, 80% of doctors using computers, and those computers create data. And that data allows patients now to begin to ascertain quality and value. It allows doctors to begin to understand, you know, the quality of the referrals they make, the quality of the devices that they're using. Uh, but as importantly, it allows us to have new payment models. And so, most of the payment models that we're, um, putting forward as a result of the Affordable Care Act rely on, you know, data to make sure that doctors aren't stinting on care, and, and…

AI assessment note: “first one is an amazing liberation of information. The second one is Changes to incentives.”

Q And there have been a number of significant changes in healthcare IT in terms of Uh, measurements and incentives. So what do you think the most significant changes have been in the sector? And why do you think we should pay attention to them?

A So I think that there's been two enormous changes, which are byproducts of the Affordable Care Act, the High Tech Act, and the recession, quite frankly, which engaged a lot of companies, uh, who pay for a lot of healthcare on how they should manage their costs. Uh, the first one is an amazing liberation of information. The second one is Changes to incentives. Um, they go together, um, On information, healthcare's been, you know, classically, you know, the, the textbook example of information asymmetry leading to inefficient markets, and for the first time, beginning with really the high tech act, which was a byproduct of the recession, we decided that it was time to wire American healthcare, and so we gave roughly thirty billion dollars to doctors to buy meaningfully used computers and to hospitals, and today we have about 90% of hospitals and, you know, 80% of doctors using computers, and those computers create data. And that data allows patients now to begin to ascertain quality and value. It allows doctors to begin to understand, you know, the quality of the referrals they make, the quality of the devices that they're using. Uh, but as importantly, it allows us to have new payment models. And so, most of the payment models that we're, um, putting forward as a result of the Affordable Care Act rely on, you know, data to make sure that doctors aren't stinting on care, and, and…

AI assessment note: “The first one is an amazing liberation of information. The second one is Changes to incentives.”

Q And if we were to go by Mark Andreessen's belief that software is eating the world, where do you see the integration of tech and healthcare on the consumer side? How can consumers benefit from the integration?

A Well, sure. So one of our portfolio companies is called Doctor on Demand. And what Doctor on Demand does is it allows you to use your phone or tablet to do a video meeting with a doctor within about a minute for 40 bucks. And it so happens that about a third of all healthcare visits can be handled over video from your home, you know, with a one minute waiting time for 40 bucks, which is about 30% of what it costs to go to a doctor's office and about three hours faster. And so there's a lot of You know, productivity you can unleash by shifting visits from, you know, brick and mortar places, um, to video and a lot of satisfaction that you can, you can create. The net promoter scores from patients when they use video telemedicine are in the seventies and eighties. Uh, when they go to a doctor's office, it's like 17. And so it's a much better way and it's much cheaper. And for most Americans who are increasingly having one in 2000 dollar, maybe 5000 dollar deductibles, you know, saving a 150 bucks when they see a doctor is a really great thing for the patient too.

AI assessment note: “saving a 150 bucks when they see a doctor is a really great thing”

Q Now, can you kick us off by telling us how you got started in the investing industry, and what you did pre-investment career?

A Sure. So, uh, my path into venture capital, um, is serendipitous. So, prior to being at Venrock, I was at the White House, where I worked on healthcare and economic policy, and I worked closely with a guy named Todd Park, Who was chief technology officer at HHS, uh, and went on to fix healthcare.gov, but before the White House, he founded a company called Caspet Health and Athena Health, and his first investor was a colleague of mine now here named Brian Roberts. When I was leaving the White House, Todd had the great idea that I should go do investing because my passion is making healthcare change more quickly, and my theory of the case was that the way to make healthcare change in America more was to make more companies that show people the way. And so Todd's, uh, suggestion was be a venture capitalist, and he introduced me to Brian Roberts, who ran Van Rock, uh, who runs Van Rock, and Brian and I clipped, and he hired me.

AI assessment note: “prior to being at Venrock, I was at the White House”

Q And if we were to go by Mark Andreessen's belief that software is eating the world, where do you see the integration of tech and healthcare on the consumer side? How can consumers benefit from the integration?

A Well, sure. So one of our portfolio companies is called Doctor on Demand. And what Doctor on Demand does is it allows you to use your phone or tablet to do a video meeting with a doctor within about a minute for 40 bucks. And it so happens that about a third of all healthcare visits can be handled over video from your home, you know, with a one minute waiting time for 40 bucks, which is about 30% of what it costs to go to a doctor's office and about three hours faster. And so there's a lot of You know, productivity you can unleash by shifting visits from, you know, brick and mortar places, um, to video and a lot of satisfaction that you can, you can create. The net promoter scores from patients when they use video telemedicine are in the seventies and eighties. Uh, when they go to a doctor's office, it's like 17. And so it's a much better way and it's much cheaper. And for most Americans who are increasingly having one in 2000 dollar, maybe 5000 dollar deductibles, you know, saving a 150 bucks when they see a doctor is a really great thing for the patient too.

AI assessment note: “allows you to use your phone or tablet to do a video meeting with a doctor”

Q Now, can you kick us off by telling us how you got started in the investing industry, and what you did pre-investment career?

A Sure. So, uh, my path into venture capital, um, is serendipitous. So, prior to being at Venrock, I was at the White House, where I worked on healthcare and economic policy, and I worked closely with a guy named Todd Park, Who was chief technology officer at HHS, uh, and went on to fix healthcare.gov, but before the White House, he founded a company called Caspet Health and Athena Health, and his first investor was a colleague of mine now here named Brian Roberts. When I was leaving the White House, Todd had the great idea that I should go do investing because my passion is making healthcare change more quickly, and my theory of the case was that the way to make healthcare change in America more was to make more companies that show people the way. And so Todd's, uh, suggestion was be a venture capitalist, and he introduced me to Brian Roberts, who ran Van Rock, uh, who runs Van Rock, and Brian and I clipped, and he hired me.

AI assessment note: “prior to being at Venrock, I was at the White House”

Q And have we seen enough of an increase in the businesses produced in the healthcare IT sector to, to, to supplement this demand?

A Um, I think so. I mean, we've seen, uh, Amazing amount of talent, um, in the form of entrepreneurs, um, coming into healthcare over the last five years, and, and a commensurate amount of increases in venture capital funding, and a broadening of those people that invest in this space, to include many technology investors, uh, to support the creation of new companies. I think we've also seen enough successes that people will say, you know, healthcare's not Siberia anymore. I could come here and build a high-growth, interesting company, uh, whether that's Athena Health, who, you know, was one of the early examples of a healthcare technology company that, you know, was SaaS that, That, that did really well, or more recently, Casper Health, or Fitbit, um, or some of our newer ones, Zenefits, and Lyra Health, that you're seeing people build high growth companies that are very interesting, uh, and that's drawing more talent to the sector. The other great thing is that it used to be, you know, equally Siberia-like to sell products to hospitals and insurance companies, and they've been jolted enough by the changes in the, in the U.S. healthcare economy that they're willing to take risks of trying products From earlier stage companies that, you know, may not pass the SOX to compliance, you know, tests that they used to put you through.

AI assessment note: “I think so. I mean, we've seen, uh, Amazing amount of talent”

Q And which areas do you think are going to be impacted most by the integration of software into healthcare, and what are you most excited about?

A Well, I think first, uh, the way in which care is delivered, uh, is going to improve substantially. One of the biggest challenges is getting the right patient to the right doctor and the right treatment. Um, Prior to going into policy, I was a physician, and I did internal medicine, healthcare, and broadly took care of adults with all kinds of problems, and I was very good at some and less experienced at others, and for the ones I was less experienced at, I'd go and read between patients with this connection and doing it right. But those patients probably weren't getting, you know, the world's best care for me since they were getting one of three people I took care of with that condition. And so I think that we'll use technology first to help match patients to the right doctors, because there's no question that matching a patient to a person that's very expert at their exact problem and their exact procedure leads to better outcomes and lower cost because there's fewer complications. So software can help us do that. The second thing software can do is no matter how expert a doctor is, you cannot read and remember Everything. And so, software will help us actually curate the literature and give us the right information to tailor care, so we know that we're giving you exactly the right medication, we have exactly the right clinical goal, we know exactly how fast you should achiev…

AI assessment note: “the way in which care is delivered, uh, is going to improve substantially.”

Q And what is it then that you love about your work? What's your favorite aspect of being a VC?

A Oh, I love making healthcare. A little bit better each day. You know, I wake up and say, can we make healthcare suck a little less today? Uh, I'm not trying to make it perfect. I'm trying to make it better. And making it better means that patients get to the doctors that take better care of them that do the right treatment and avoids patient suffering and unnecessary costs. Making it better is getting rid of stupid processes that require faxing. Uh, making it better is, is getting rid of the waiting time to go get a simple problem solved. Uh, making it better Uh, is, is helping an insurance company design a benefit design that actually is understandable. And so, to me, that's what makes it, makes, you know, life rewarding. I also love it because I can show people the way. I mean, there's no question that Castlight Health, a company that I joined the board of when I left the White House, um, that helps give out price and quality information, um, has had an amazing effect on everybody in the healthcare system. Every insurance company in the country in America, in America today, will tell patients, you know, What the cost is of a procedure that they're about to pay, and something about the quality, and that wasn't true before they were attacked by Castlight, uh, and so I'm grateful for the fact that we can pull people forward.

AI assessment note: “I love making healthcare. A little bit better each day.”

Q And what would you say that are the barriers that remain in, in preventing kind of full scale innovation and business growth in the healthcare IT sector?

A Um, for the last couple years, quite frankly, the incumbents have done pretty well, and so with the expansion of coverage, there's been a nice uptick in volume of paying customers, and the bad debt that used to plague hospitals and doctors has gone down, and so margins have actually gotten better for hospitals and insurance companies, which allows them to, you know, to change less quickly. Uh, the other issue is Um, we've had a lot of consolidation on, on the provider side, um, which allows those systems to raise prices and, and therefore feel less pressure on productivity. And so that's, you know, modulating the rate at which we're having full-scale adoption of, you know, new payment models and, and then the tools that they need.

AI assessment note: “margins have actually gotten better for hospitals... which allows them to, you know, to change less quickly.”

Q And how do you feel that working, uh, in politics and at the White House prepared you for a career in venture?

A Oh, great question. Um, I think they're both actually, you know, great chances to do problem solving. When you're at the White House, you're trying to think through, how can I get 60 senators to agree on something, and what are the things you have to give and take to make that happen, as well as to, you know, make the rest of America accept an idea. With a little company, you're, you have to imagine, you know, how can I invent a product or a service that somebody wants to use, that will make sense, that will have, you know, all right of them today that I can make, Uh, and that over time can grow into an interesting business that has, you know, things like network effects and economics around it that, that make it interesting. And, you know, it's, it's the same type of creative problem solving I think that you have to use to imagine how a policy can become a law and change America.

AI assessment note: “they're both actually, you know, great chances to do problem solving.”

Q And which opportunity in terms of job, uh, allows you to have the most impact in improving the healthcare sector, would you say? Would you say it was your previous job, uh, working in the political side of life, or would you say it was in Venrock? Where do you have the most, kind of, opportunity to improve healthcare?

A I think today it's in the private sector, um, places like Venrock or the companies that we and others fund, um, showing people the way forward and showing people you can build new businesses that have better margins and better growth, uh, by embracing new incentives. Uh, and then that will be, you know, that will lead to big companies and will lead to lots of emulation and copying by incumbents, which makes the whole healthcare system better for people. Uh, and so I think today the game is being played in the private sector and that we're the ones leading the way. And then over time, you know, there'll be future regulatory changes to you that probably cement some of these changes and push us further forward, but I bet for the next decade the disruption comes from the private sector, and so I feel happy to be here.

AI assessment note: “I think today it's in the private sector, um, places like Venrock”

Q And which areas do you think are going to be impacted most by the integration of software into healthcare, and what are you most excited about?

A Well, I think first, uh, the way in which care is delivered, uh, is going to improve substantially. One of the biggest challenges is getting the right patient to the right doctor and the right treatment. Um, Prior to going into policy, I was a physician, and I did internal medicine, healthcare, and broadly took care of adults with all kinds of problems, and I was very good at some and less experienced at others, and for the ones I was less experienced at, I'd go and read between patients with this connection and doing it right. But those patients probably weren't getting, you know, the world's best care for me since they were getting one of three people I took care of with that condition. And so I think that we'll use technology first to help match patients to the right doctors, because there's no question that matching a patient to a person that's very expert at their exact problem and their exact procedure leads to better outcomes and lower cost because there's fewer complications. So software can help us do that. The second thing software can do is no matter how expert a doctor is, you cannot read and remember Everything. And so, software will help us actually curate the literature and give us the right information to tailor care, so we know that we're giving you exactly the right medication, we have exactly the right clinical goal, we know exactly how fast you should achiev…

AI assessment note: “we'll use technology first to help match patients to the right doctors”

Q And what would you say that are the barriers that remain in, in preventing kind of full scale innovation and business growth in the healthcare IT sector?

A Um, for the last couple years, quite frankly, the incumbents have done pretty well, and so with the expansion of coverage, there's been a nice uptick in volume of paying customers, and the bad debt that used to plague hospitals and doctors has gone down, and so margins have actually gotten better for hospitals and insurance companies, which allows them to, you know, to change less quickly. Uh, the other issue is Um, we've had a lot of consolidation on, on the provider side, um, which allows those systems to raise prices and, and therefore feel less pressure on productivity. And so that's, you know, modulating the rate at which we're having full-scale adoption of, you know, new payment models and, and then the tools that they need.

AI assessment note: “margins have actually gotten better for hospitals and insurance companies, which allows them to”

Q And how do you feel that working, uh, in politics and at the White House prepared you for a career in venture?

A Oh, great question. Um, I think they're both actually, you know, great chances to do problem solving. When you're at the White House, you're trying to think through, how can I get 60 senators to agree on something, and what are the things you have to give and take to make that happen, as well as to, you know, make the rest of America accept an idea. With a little company, you're, you have to imagine, you know, how can I invent a product or a service that somebody wants to use, that will make sense, that will have, you know, all right of them today that I can make, Uh, and that over time can grow into an interesting business that has, you know, things like network effects and economics around it that, that make it interesting. And, you know, it's, it's the same type of creative problem solving I think that you have to use to imagine how a policy can become a law and change America.

AI assessment note: “I think they're both actually, you know, great chances to do problem solving.”